Sensex off lows from S&P revision; Wipro, GAIL, BHEL, Coal India down

MUMBAI: The Sensex pared some of intraday losses after a kneejerk reaction to S&P's revision of India outlook to negative from stable. S&P affirmed the 'BBB-' rating.

The rating agency expects the government to face headwind in implementing policy measures to improve fiscal and macroeconomic parameters in the near future, given the current unfavorable political environment.

The negative outlook signals at least a one-in-three likelihood of a downgrade in India's sovereign ratings within the next 24 months.

"S&P has maintained India's sovereign rating at 'BBB-' but the outlook has been revised downward to 'negative'. This action is based on factors that are already widely known. Importantly, at this stage it is just an outlook change and not a ratings downgrade. To that extent, it is more of a warning of increasing vulnerabilities of the country.

Nonetheless, the action can impact INR in the near term, which is already under pressure, and perhaps raise external borrowing costs for some corporates. However, the silver lining could be that this action could exert pressure on the government to act on the fiscal front (possibly by raising the diesel prices, etc.) as well as on the policy front," an Edelweiss report stated.

The rupee shed some of intraday gains and was at 52.58 per dollar, up 10 paise, against the previous close of 52.68.

At 2:00 p.m., the Sensex was at 17,134.25, down 73.04 points, or 0.42 percent. It has touched a high of 17,249.61 and a low of 17,019.24 in trade so far.

The Nifty was at 5,197, down 25.65 points, or 0.49 percent. It has touched a high of 5,236.10 and a low of 5,160.65 in trade so far.

"In view of the current price action on the daily chart, it is clear that 5,180, which is the confluence zone of support and resistance, is the crucial level. If the Nifty trades convincingly above the 5,235 level then it has the potential to test the 5,280-5,320 levels. On the flip side, if the 5,180 level is breached, the next logical support is the 200 day SMA which is at the 5,134 level. Traders are advised to maintain a cautious approach towards the market," according to an Arihant Capital Market report.

The BSE Midcap Index was down 0.75 percent and the BSE Smallcap Index moved 0.71 percent lower.

Among sectoral indices, the BSE Realty Index fell 1.58 percent, the BSE Power Index was down 1.21 percent, the Capital Goods Index declined 1.09 percent and the BSE IT Index was down 1.05 percent. The BSE Auto Index was up 0.18 percent and the BSE FMCG Index moved 0.18 percent higher.

The market breadth was negative on the BSE with 911 gainers against 1687 losers.

European markets moved higher even as the UK's GDP data showed the economy slipped into recession. The FTSE 100 was up 0.57 percent, the CAC 40 rallied 1.39 percent and the DAX moved 1.26 percent higher.